Incentive systems for technical change: the Chinese system in transition

This article examines the incentive system for generation of technical change in Chinese industry, focusing on two distinct periods: (1) the planned economy up to the late 1970s, and (2) the preliminary market economy of the 1980s and the first half of the 1990s. The analysis indicates that there were inconsistent pressures on enterprises for technical change during the planned economy period. It further indicates that, during the preliminary market economy period, the government has mainly focused on reward-type incentives, which were later supplemented with market mechanism and competition on equal terms. Therefore, the article argues that the government should still make efforts to establish a complete system, which both offers rewards and exerts pressures for technical change.